current issues in india regarding undeclared assets · black money (undisclosed foreign income and...
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CURRENT ISSUES IN INDIA REGARDING
UNDECLARED ASSETS
Rahul P. Ranadive, J.D., LL.M. (Taxation)Ranadive Law, P.A.1001 Brickell Bay Drive, Suite 1200Miami, FL [email protected]
Voluntary Disclosures, Panama Papers, FATCA and CRS
© Ranadive Law, P.A., 2016
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© Ranadive Law, P.A., 2016
India Voluntary Disclosure Schemes
• 1997 Voluntary Disclosure of Income Scheme
• Only targeted undisclosed assets and income within India• $5B of assets disclosed – yielded $1.5B in taxes (30% penalty rate)
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© Ranadive Law, P.A., 2016
India Voluntary Disclosure Schemes
Black Money (Undisclosed Foreign Income and Assets)and Imposition of Tax Act, 2015
• Three-month compliance window from 1 July to 30 September 2015• Required declarants pay 30% each for penalty (assets) and tax (income)
on the disclosed amounts. • Govt originally estimated $45B of assets would be disclosed• Only 638 declarants with average disclosure of under $1M – Total $632M disclosed• No immunity from other laws – Anti-Money Laundering; Foreign Currency Controls
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© Ranadive Law, P.A., 2016
Panama Papers
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© Ranadive Law, P.A., 2016
Panama Papers
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© Ranadive Law, P.A., 2016
Panama Papers
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Model 1 (Reciprocal) IGASigned July 2015FFIs report U.S. accounts to ITORegister with IRS for GIIN
https://apps.irs.gov/app/fatcaFfiList/flu.jsfSo far 1,005 Indian FFIs have registeredBanks; Mutual Funds; Brokerages; LICsMany private trusts but no HUFs
© Ranadive Law, P.A., 2016
FATCA in India
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Early Adopter Group
Has signed the Multilateral Competent Authority Agreement and domestic legislation has been introduced
Start Compliance in 2016 and First Exchanges by 2017
2017 Tax Haven JurisdictionsBVI; Cayman; Isle of Man; Mauritius
2017 CountriesMost European countries, primarily United Kingdom
2018 CountriesAustralia; Canada; Hong Kong; Singapore; Switzerland
© Ranadive Law, P.A., 2016
CRS in India
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Unknown Accounts
Known but POA Accounts
Historic Transferred Accounts
HUF Accounts
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific Problems
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Unknown AccountsHuge percentage use Indian address and PAN
Known but POA AccountsNRO/NRE easy to identify but not Resident accounts
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific Problems
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FATCA Regulations on Historic Accounts
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific ProblemsHistoric Transferred Accounts
Any account in existence July 1, 2014 onwards over $50,000
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What is a HUF under Indian Law?
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific ProblemsHUF Accounts
Usually for ancestral property such as a family homeBut often have bank accounts and portfolio accounts
Created upon initial inheritance resulting from patriarch’s deathOldest Son is usually Kartha, although Daughters now eligibleChildren, Grandchildren and Great-grandchildren are Co-ParcenorsWives of Co-Parcenors are Members, but not HusbandsOnly Co-Parcenors have partition, but not renunciation, rights
Separate taxable entity for Income Tax purposes
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What is a HUF under FATCA?
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific ProblemsHUF Accounts
Definition of FFI• Accepts deposits in the ordinary course of a banking or similar business (e.g. a bank)• Holds, as a substantial part of its business, financial assets for the account of others
(e.g. a custodian)• Is engaged, or holds itself out as being engaged, in the business of investing,
reinvesting, or trading in financial instruments, including derivative contracts (e.g. mutual funds, hedge funds, private equity funds)
• An insurance company that issues annuities or cash value insurance policies• Under IGA – an NFFE with a managed account
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What is a HUF under CRS?
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific ProblemsHUF Accounts
Definition of Reporting FI• Depository Institutions• Custodial Institutions• Investment Entities• Specified Insurance Companies
Relevant Category of Non-Reporting FI• Trustee Documented Trust
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What is a HUF under CRS?
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific ProblemsHUF Accounts
A trust is generally classified as a Reporting FI if:(1) The trust’s gross income is primarily attributable to investing,
reinvesting, or trading in financial assets, and(2) The trust is managed by another entity which is a FI.
CRS generally applies to trusts when:(1) A trust is itself a Reporting FI; or(2) Is a NFE which has a financial account with a Reporting FI.
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What is a HUF under 7701 Entity Classification Regs?
© Ranadive Law, P.A., 2016
FATCA/CRS in India – Specific ProblemsHUF Accounts
• Eligible Entity or Not• Corporation - possibly• Partnership – possibly• Default classification depends on creation date
• Trust• Business Trust?• Grantor – most likely not• Non-Grantor - probably
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THANK YOU
QUESTIONS?
© Ranadive Law, P.A., 2016
Rahul P. Ranadive, J.D., LL.M. (Taxation)Ranadive Law, P.A.1001 Brickell Bay Drive, Suite 1200Miami, FL [email protected]